Affluent individuals have begun borrowing against their private equity holdings to help offset the impact of a prolonged four-year dealmaking slump.

The slowdown in transactions has squeezed the cash that buyout funds return to investors.

Net asset value (NAV) loans were previously used mainly by institutions seeking to leverage their private equity and private credit holdings, but increasingly wealthy individuals and the family offices managing their wealth are now adopting this approach as well.

Buyout funds are the largest asset class in the private capital industry.

Over the past four years, due to sluggish deal activity, these funds have returned far less cash to their investors than they did over the previous decade.

This has left the backers of these funds 鈥?including large pension funds, buyout industry executives, and a growing number of individual investors 鈥?scrambling for other sources of liquidity while their investments remain locked up.

Ben Williams, head of private banking, lending and deposits for Europe, the Middle East, Africa and Asia at Goldman Sachs, said clients' tolerance for assets that "can't create more value for them" is "declining."

According to a UBS report, family offices allocated 20% of their assets to private equity and private debt in 2025, up from 16% in 2019.

Williams added: "You would at least want the opportunity to make as much of your assets work as possible in a risk-efficient way. And an asset that can't work is inherently inefficient."

NAV loans are an alternative to selling holdings on the secondary market, where transactions typically need to be completed at a discount.

Investors can borrow based on the value of their holdings, obtaining cash without recognizing a loss, and then put those funds into other investments.

According to research from Fund Finance Partners, the total NAV loan market is worth approximately $150 billion, with the average single transaction size at around $150 million.

Scott Rosen of private credit group Ares said individual use of this financing method is still at an early stage.

But he added that NAV financing is increasingly becoming "another source of liquidity."

Dupe Adeyemo of asset manager AllianceBernstein said that a decade ago, "the phrase 'NAV loan' for individuals simply didn't exist 鈥?it was just a one-off, special transaction."

However, he said that in recent years "this market has become institutionalized," so NAV loans for individuals have become a recognized standalone category.

Goldman Sachs' Williams said NAV loans do pose challenges for banks due to the illiquidity of the underlying assets.

"This is one of the most difficult types of business," he said.

Williams said that for NAV loans, Goldman Sachs typically lends 25% to 35% of asset value, far below the 40% to 60% loan-to-value ratio banks usually offer for art-backed loans.

Art is likewise a type of illiquid asset that wealthy individuals use as collateral for borrowing.

Loan terms are typically two to three years and are frequently renewed.